Materials Management

1. MATERIAL MANAGEMENT

2. Definition
It is concerned with planning, organizing and
controlling the flow of materials from their initial
purchase through internal operations to the service
point through distribution.
OR
Material management is a scientific technique,
concerned with Planning, Organizing &Control of flow
of materials, from their initial purchase to destination.

3. Purchase Order: A document authorizing the
purchase of a product or service from a vendor
Traveling Requisition: A catalog of products used to
order supplies stocked by material management
Standing Orders: A purchase order issued for a
product or service to be delivered according to a preset
schedule

4. Inventory Level Checks
Perpetual System: A system that keeps account of
the inventory each time a product is used or removed
from inventory
Periodic System: A system whereby inventory levels
are checked according to an established timetable
Random Checks: A method used to verify inventory
levels

5. Economic Ordering Quantity (EOQ): A formula used
to determine the quantity of supplies to order at one
time
Economic Ordering Point (EOP): The point at which
inventory should be re-ordered
Optimal Reorder Time (ROT): The best time to place
an order to take advantage of EOQ and EOP

6. AIM OF MATERIAL MANAGEMENT
To get
1. The Right quality
2. Right quantity of supplies
3. At the Right time
4. At the Right place
5. For the Right cost

7. PURPOSE OF MATERIAL MANAGEMENT
•To gain economy in purchasing
•To satisfy the demand during period of replenishment
•To carry reserve stock to avoid stock out
•To stabilize fluctuations in consumption
•To provide reasonable level of client services

8. Primary
•Right price
•High turnover
•Low procurement
•& storage cost
•Continuity of supply
•Consistency in quality
•Good supplier
relations
•Development of
personnel
•Good information
system
Objective of material management
Secondary
•Forecasting
•Inter-departmental
harmony
•Product improvement
•Standardization
•Make or buy decision
•New materials & products
•Favorable reciprocal
relationships

9. Economy in material management
•Containing the costs
•Instilling efficiency in all activities

10. Four basic needs of Material
management
1. To have adequate materials on hand when needed
2. To pay the lowest possible prices, consistent with
quality and value requirement for purchases
materials
3. To minimize the inventory investment
4. To operate efficiently

11. Basic principles of material management
1. Effective management & supervision
It depends on managerial functions of
• Planning
• Organizing
• Staffing
• Directing
• Controlling
• Reporting
• Budgeting
2. Sound purchasing methods
3.Skillful & hard poised negotiations
4.Effective purchase system
5.Should be simple
6.Must not increase other costs
7.Simple inventory control programme

12. Elements of material management
1. Demand estimation
2. Identify the needed items
3. Calculate from the trends in Consumption during last
2 years.
4. Review with resource constraints

13. Functional areas of material management
1. Purchasing
2. Central service supply
3. Central stores
4. The print shops
5. The pharmacy
6. Dietary
& Linen services

14. Procurement cycle
• Review selection
• Determine needed quantities
• Reconcile needs & funds
• Choose procurement method
• Select suppliers
• Specify contract terms
• Monitor order status
• Receipt & inspection

15. Objectives of procurement system
•Acquire needed supplies as inexpensively as possible
•Obtain high quality supplies
•Assure prompt & dependable delivery
•Distribute the procurement workload to avoid period of
idleness & overwork
•Optimize inventory management through scientific
procurement procedures

16. Points to remember while purchasing
•Proper specification
•Comparison of offers based on basic price, freight & insurance,
taxes and levies
•Quantity & payment discounts
•Payment terms
•Delivery period, guarantee
•Vendor reputation
(reliability, technical capabilities, Convenience, Availability, after-
sales service, sales assistance)
•Short listing for better negotiation terms
•Seek order acknowledgement

17. Storage
• Store must be of adequate space
• Materials must be stored in an appropriate place
• in a correct way
• Group wise & alphabetical arrangement helps in
• identification & retrieval
• First-in, first-out principle to be followed
• Monitor expiry date
Issue & use
Can be centralized or decentralized

18. Inventory control
It means stocking adequate number and
kind of stores, so that the materials are
available whenever required and wherever
required. Scientific inventory control results
in optimal balance

19. Functions of inventory control
•To provide maximum supply service,
consistent with maximum efficiency &
optimum investment.
•To provide cushion between forecasted &
actual demand for a material

20. Economic order of quantity
EOQ = Average Monthly Consumption X Lead Time [in
months] + Buffer Stock – Stock on hand
CARRYING
COST
PURCHASING
COST
ECONOMIC ORDER OF
QUANTITY(EOQ)

21. •Re-order level: stock level at which fresh
order is placed.
•Average consumption per day x lead time +
buffer stock
•Lead time: Duration time between placing
an order & receipt of material
•Ideal – 2 to 6 weeks.

22. For maximum financial benefit and storage space
utilization, order 469 packs of plates each time the
inventory drops to 211 (about every 16 days)

23. PROCURMENT OF EQUIPMENT
Points to be noted before purchase of an
equipment:
•Latest technology
•Availability of maintenance & repair facility,
with minimum down time
•Post warranty repair at reasonable cost
•Upgradeability
•Reputed manufacturer
•Availability of consumables
•Low operating costs
•Installation
•Proper installation as per guidelines

24. HISTORY SHEET OF EQUIPMENT:
History sheet
Name of equipment
Code number
Date of purchase
Name of supplier
Name of manufacturer
Date of installation
Place of installation
Date of commissioning
Environmental control
Spare parts inventory
Techn. Manual / circuit
diagrams / literatures
After sales arrangement
Guarantee period
Warranty period
Life of equipment
Down time / up time
Cost of maintenance
Unserviceable date
Date of condemnation
Date of replacement

25. EQUIPMENT MAINTENANCE & CONDEMNATION
Maintenance & repairs:
Preventive maintenance
Master maintenance plan
Repair of equipment

26. PREVENTIVE MAINTENANCE
•Purchase with warranty & spares.
•Safeguard the electronic equipments with: (as per
guidelines)
•Voltage stabilizer, UPS
•Automatic switch over generator
•Requirement of electricity, water, space, atmospheric
conditions, etc. Must be taken into consideration
•Well equipped maintenance cell must be available
•All equipment must be operated as per instructions with
trained staff
•Monitoring annual maintenance contracts. (AMC)
•Maintenance cell
•Communications between maintenance cell & suppliers of
the equipment.
•Follow-up of maintenance & repair services
•Repair of equipment
•Outside agencies
•In-house facility

27. CONDEMNATION & DISPOSAL
Criteria for condemnation:
The equipment has become:
1. Non-functional & beyond economical repair
2. Non-functional & obsolete
3. Functional, but obsolete
4. Functional, but hazardous
5. Functional, but no longer required

28. PROCEDURE FOR CONDEMNATION
1. Verify records.
2. History sheet of equipment
3. Log book of maintenance & repairs
4. Performance record of equipment
5. Put up in proper form & to the proper authority

29. DISPOSAL
1. Circulate to other units, where it is needed
2. Return to the vendor, if willing to accept
3. Sell to agencies, scrap dealers, etc
4. Auction
5. Local destruction

30. CONCLUSION
Material management is an important management tool which will be
very useful in getting the right quality & right quantity of supplies at
right time, having good inventory control & adopting sound methods
of condemnation & disposal will improve the efficiency of the
organization & also make the working atmosphere healthy any type
of organization, whether it is Private, Government ,Small
organization, Big organization and Household.
Even a common man must know the basics of material management
so that he can get the best of the available resources and make it a
habit to adopt the principles of material management in all our daily
activities

31. Problem 1
Annual usage: 8000 boxes of syringe
Cost of ordering: 10,250 per order
Annual holding cost: 1000 pesos per year
Lead time: 5 days

32. Problem 2
Annual usage: 2000 boxes of red top tubes
Cost of ordering: 4350 per order
Annual holding cost: 2000 pesos per year
Lead time: 10 days

33. Problem 3
Annual usage: 12000 boxes of glass slides
Cost of ordering: 9850 per order
Annual holding cost: 6000 pesos per year
Lead time: 15 days